Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday April 3.
Nike (NKE) is a casualty of its last earnings report, which was not so much a disappointment as it was misunderstood. The stock got slammed, falling from $110 to $107 in one day, and even though it has inched back up since its decline, Nike is still being unfairly penalized. The company delivered a 3 cent earnings beat on revenues that rose 15%, but several things scared off investors. First, the apparel sales were weaker than expected. Second, gross margins declined by 200 basis points. Third, inventories were up by 32%. Why isn't Cramer more concerned about the stock? The issue is that investors were not looking at the right metrics. Nike is unique in having a business model which allows customers to order merchandise 6 months ahead of time; this gives the company great visibility to future earnings. The higher input costs can be offset by the 8% price increases Nike can put through because of the popularity of its brand. Most of the inventory rise came from higher input costs and changes in its product mix, not by having unsold merchandise. Future orders were up 15%, which more than offsets the company's apparent problems.
In addition, Nike has great catalysts, including its production of NFL uniforms, the Summer Olympics and the World Cup. Domestic sales were so strong that management joked that the U.S. was like an emerging market for Nike. The company is developing its own stores and can cut out the middle man while generating higher profits. Nike is also like a tech company for sporting wear, and is creating wristbands that measure miles, heart rate and calories burned. Users can download this information and compare it with other athletes online. Nike trades at a multiple of 17 with a 13% growth rate, and deserves to go higher. "Stop punishing Nike," Cramer told viewers.
Cramer took some calls:
Fossil (FOSL) is flying, and has doubled. Cramer would buy only if it gets hit on a down day.
Skullcandy (SKUL): "I blew this one," Cramer confessed. "I don't feel qualified to opine on it...I was negative and I should have been positive."
There were concerns over "irrational exuberance" about Apple (AAPL), when an analyst said the company could eventually be worth a trillion dollars. Cramer doesn't think this assessment is irrational or overly exuberant, because Apple is leading the tech sector and will continue to lead. It was predicted that investors may be willing to pay $1,000 for the stock by 2014. The company is truly crushing its competitors and is taking market share, while destroying "old tech." The company grows at a rate of 18%, and if it continues this upward path and keeps taking market share, the $1,000 target is not unrealistic; "The predictions are completely sober and rational," said Cramer.
Cramer took some calls:
Ford (F) is an international company, which means it will continue to be hurt by European woes. "It is a stuck in the mud situation," said Cramer, who recommends more domestically-oriented stocks.
Solazyme (SZYM) is acting like a rocket and needs to cool off back down to $15 before it can be bought.
Netflix (NFLX) is suffering from competition and is not a stock to buy.
Tech is a sector that is on the way up, but not all tech stocks are created equal. Microsoft (MSFT) and Intel (INTC) have charts and fundamentals that are clean, if not pristine, but Oracle (ORCL) and Cisco (CSCO) are stocks with a lot of "hair" on them. MSFT and INTC are showing bullish trends for the short and long-term. Cisco is bearish long-term, but it could work as a short-term trade, while Oracle is the opposite; its long-term trajectory looks good, but it has short-term headwinds. Intel is at $28, just shy of its $30 ceiling. If Intel breaks above this ceiling, it could see a rise to $35. In addition, the company has a strong balance sheet and an aggressive buyback.
Microsoft's story looks even better than Intel's. MSFT has been stuck under a $34 ceiling for a long time, but if it breaks through this level, it could see a rise to $47, for a 45% gain. It might not be too long before "Mister Softee" gets its groove back, said Cramer.
CEO Interview: David Hoster, Eastgroup Properties (NYSE:EGP)
Eastgroup Properties (EGP) is a REIT focused on the industrial market. CEO David Hoster discussed a demographic shift to the Sunbelt, and sees a resurgence in Florida and Arizona. The REIT was hit hard during the housing crisis, when its occupancy rate fell to 86%, but now it has risen to 93.9%, even without significant signs of recovery. Hoster commented that in the event of an aggressive recovery, EGP should see a larger upside. While rent increases are flat, the company is making up for this with the rise in occupancy rates. Cramer thinks EGP is a steadily growing stock with a solid 4% yield.
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